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Monday, May 7

7th May - US Open: Bounce after 'MerDe'

Here are the US open links - UK was closed and markets are reacting just as I expected: the "buy the rumor, sell the news" is working in reverse, and markets are rallying after the "bad news".

Joke of the Day
Merkel arrives to Athens airport. 

Immigration officer: Nationality?
Merkel: German

Immigration officer: Occupation?
Merkel: No, I am here only for a meeting.
After 'Merkozy', what should we call Hollande and Merkel? Merklande, Hollkel, Homer, Merde, Mellande, Mellander, Merder or Landmerk? Or is it so that there will only be a Merkel from now on?
Quotes of the Day 
Gold is a great thing to sew onto your garments if you're a Jewish family in Vienna in 1939 but civilized people don't buy gold - they invest in productive businesses.Charlie Munger
Mr. Munger is known for his delicate touch. Piping up on the compensation consultant issue, he remarks that when it comes to that profession, prostitution would be “a step up.” Mr. Buffett only notes afterward that his longtime buddy “is in charge of diplomacy” at the company. – DealBook / NYT
Mr. Buffett relates one anecdote where unnamed regulators asked Mr. Munger whom Berkshire lends money to. The succinct Mr. Munger replied, “Not people like you.” – DealBook / NYT

Here's what you missed during the weekend (the Calendar-page has been updated as well):

6th May - Sell-Side Research (weekly reports from GS, JPM, CS…)
4th May - Weekly Support (weekly reviews and previews)

Daily US Opening News And Market Re-Cap: May 7 – RanSquawk / ZH
Frontrunning: May 7 – ZH
Daily Press Summary – Open Europe
The Lunch Wrap – alphaville / FT
EM New York headlines – beyondbrics / FT

Overnight Sentiment: Clutching At StrawsBank of America / ZH
Morning MarketBeat: Markets Have a Hollande-Daze – MarketBeat / WSJ
Broker Note Briefing: – WSJ
Morning Take-Out – DealBook / NYT
AM Dear Dairy: Election Aftermath  – Macro and Cheese
Initial Anxiety Stemmed, More Later and 6 Observations  – Marc to Market
The T Report: Europe Wasn’t Destroyed in a DayTF Market Advisors

Pre-market Commentary – Marketwatch
Pre-Market Trading – CNNMoney          
Pre-Market – NASDAQ
US Equity Preview – Bloomberg
Earnings & Events – The Street
MarketCurrents – Seeking Alpha

Debt crisis: live – The Telegraph
Europe Crisis Tracker – WSJ
Tracking Europe’s Debt Crisis – NYT
FX Options Analytics – Saxo Bank

Why the Eurozone Crisis is Not OverPIIE
Martin Wolf, Financial Times on May 3: Wolf believes that the euro area crisis in fact has barely begun and requires a process of adjustment that could take a full decade and posed the question of whether the member countries have the political will to make that process work and resolve the crisis successfully. Audio (mp3), Video (youtube), Presentation (pdf), Transcript (pdf)

Lies, Damned Lies And StatisticsMark Grant / ZH
What I find particularly difficult is what they are doing in Europe and continue to do because they are formulating systemic lies and they are doing it knowingly, purposefully; with the single motivation being to fool people. It can no longer be said that it is not systemic as the European Union does not object, has not objected, so that even Germany and the Netherlands and Finland have become accomplices to the schemes.

German savers should applaud the growing TARGET
The Eurozone debt crisis has led to increasing imbalances among Europe’s central banks, the causes and consequences of which are the subject of fierce debate. But this column argues that the discussions are missing a fundamental point – the extent to which the German financial sector and German savers benefit from this arrangement.

Dummies Guide To Europe's ProblemsZH

Spain-Accumulated ImbalancesThe Trader
Full doc here (pdf)

The Spanish Bank Bailout Begins ZH
"Spain may pump public funds into its banking system to revive lending and its recessionary economy, Prime Minister Mariano Rajoy said Monday, signalling a policy U-turn. The government had pledged to not give money to the banking industry that is struggling in the wake of a collapsed, decade-long, housing boom. "If it was necessary to reactivate credit, to save the Spanish financial system, I wouldn't rule out injecting public funds, like all European countries have done"

Citi: Probability of Greek’s Euro exit rises to more than 50%Also Sprach Analyst

Hollande win, Greek deadlock – the analysts reactalphaville / FT
SocGen, Nomura, RBC. For full coverage of the elections, see this.

What does Europe want to do now?Wonkblog / WP
Perhaps the reality of the euro zone right now is that this isn't just about what Hollande does now. It's about what Merkel wants to do now, and what the ECB wants to do now. The old consensus is no longer politically sustainable.

The debate on austerity: are economists barking up the wrong tree?bruegel
While economists are trying to convince politicians of the high costs of too much austerity, the reality may be different. Europe’s politicians don’t need convincing that austerity is costly. They know this. But they think this is a price worth paying. Instead of trying to argue why austerity is or isn’t costly, economists should try to understand why politicians adhere to this point of view.

Euro-zone stabilization: Not countercyclical enough, then or nowFree exchange / The Economist
The insight that the fiscal policy stance in the periphery prior to this crisis was insufficiently countercyclical also allows for a more convincing argument against the German emphasis on austerity: if they criticise the periphery's fiscal policy before the crisis on macroeconomic grounds, they should be in favour of more fiscal stimulus and less austerity now.

Draghi's "growth pact" = Internal devaluationHumble Student of The Markets
Notwithstanding the news flow over the pending elections, the fight over austerity and structural adjustments is by no means over, regardless of the electoral outcome. My bet, in the long run, is still on Draghi and Merkel. In the short run, however, anything can happen.

How to Get the Balance Right: Fiscal Policy At a Time of CrisisiMFdirect
Sweden provides an interesting case study for countries’ current predicament…. In response, Sweden initiated a comprehensive set of reforms. Favorable external conditions helped, but domestic policies played a critical role in the adjustment.

On the Odds of an EaseBruce Krasting
I’m going to go against the consensus opinion. The Fed is on hold until December. We will not see another LTRO operation this year. If I'm right, what does it mean for those lines on that chart? Nothing good.

Watchful WaitingPIMCO
Today, the Federal Reserve itself faces an “unusually uncertain” period because it lacks a complete understanding of the potential side effects of its unconventional policy actions; in particular the elongated timeline of its zero interest rate policy and its massive money printing. What matters in shaping market expectations about inflation and deflation are the credibility of fiscal policy, the prospect for real economic growth and the central bank’s commitment to step back from the punch bowl.

Central Bank reserve creation in the era of negative money
Are central banks printing vast quantities of money? This column explains how money-multiplier economics (central banks create reserves that allow commercial banks to create money) no longer holds. Today, non-bank financial institutions play a pivotal role in money/liquidity creation, but hold no reserves. Their lending depends on “private reserves”, mainly highly liquid government securities. Creating more ‘public’ reserves by buying such ‘private’ reserves doesn’t trigger money creation – it just substitutes among reserve types. Open-market purchases only create money if they swap a monetary base for assets that are no longer accepted at full value as collateral in the market.

Strategic Briefing: Fed Governors & Monetary Policy Under PressureThe Capital Spectator
Summaries of and links to recent articles
Battle of the beards’: Paul Krugman vs. Ben BernankeWP
Krugman accuses Bernanke of being too timid in fighting high unemployment and slow economic growth. Bernanke calls Krugman’s policy proposals “reckless.” h/t The Trader

Economic surprise index eerily reminiscent of last yearSober Look

Chinese banks “among the most thinly capitalised”Also Sprach Analyst
I continue to intensely dislike Chinese banks, as banks are highly financially levered with little capital.  Slight reduction in banks’ asset value (through non-performing loans, for example) can have big impact on the value of banks’ equities

Flash Crash, Two Years LaterMarketBeat / WSJ

The Last ChartistPrice Action Lab Blog
Surrounded by robots he knew the end was near. One chartist against 1,000 HFT robots.

A new way of thinking about the global machineFT
It is useful to think of the global economy as one dynamic and complex machine. And in recent years, many have noted that the old clunker is stalling, even suggesting that it is in need of a total overhaul. The benefit of a breakdown is that it gives us all time to reflect.

Economists, Liquidity Mongers and the Banker Assault on Financial Reformnaked capitalism
Bankers and their lobbyists and economists help grease the skids not just with money – but with terms of “econ-speak” such as “cost-benefit analysis”, and most commonly, “liquidity”. Used and manipulated by the wrong hands, such boring and innocuous sounding concepts can turn dangerous, even fatal in the banker battle against safer financial regulation. The list of delays, loopholes and obstacles is too long to fully recount, but here are a few of the most important.

Shadow Banking 101Azizonomics
The status quo is that we have a broken and dangerous system that doesn’t really work, surviving on government subsidies. Sure, a full collapse of shadow banking in 2008 would have been painful. But we may have created a bigger and more painful collapse further down the road.

Berkshire Annual Meeting HighlightsZH
Mr. Buffett relates one anecdote where unnamed regulators asked Mr. Munger whom
Berkshire lends money to. The succinct Mr. Munger replied, “Not people like you.”

Economic TribalismKrugman / NYT
People aren’t very receptive to evidence if it doesn’t come from a member of their cultural community. This has been blindingly obvious these past few years.

A Graphic PresentationJohn Mauldin / The Big Picture
April Employment, A Graphic Review of the Strategic Investment Conference

A Curated Linkfest For The Smartest People On The Web!Simoleon Sense

The Dalai Lama on Science and Technologybrain pickings
Pain, pleasure, and what sets man apart from machine.

An era of human-affected EarthFlowingData
Nice animation

7 things every Facebook user needs to knowBarking up the wrong tree